Correlation Between Science Applications and StarTek

Can any of the company-specific risk be diversified away by investing in both Science Applications and StarTek at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Science Applications and StarTek into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Science Applications International and StarTek, you can compare the effects of market volatilities on Science Applications and StarTek and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Science Applications with a short position of StarTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and StarTek.

Diversification Opportunities for Science Applications and StarTek

0.5

Correlation Coefficient

Science Applications  StarTek

Very weak diversification

The 3 months correlation between Science and StarTek is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and StarTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StarTek and Science Applications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Science Applications International are associated (or correlated) with StarTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StarTek has no effect on the direction of Science Applications i.e., Science Applications and StarTek go up and down completely randomly.

Pair Corralation between Science Applications and StarTek

Given the investment horizon of 90 days Science Applications International is expected to generate 0.49 times more return on investment than StarTek. However, Science Applications International is 2.03 times less risky than StarTek. It trades about 0.02 of its potential returns per unit of risk. StarTek is currently generating about -0.05 per unit of risk. If you would invest  10,305  in Science Applications International on October 7, 2024 and sell it today you would earn a total of  1,113  from holding Science Applications International or generate 10.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	26.21%
Values	Daily Returns

Science Applications Internati  vs.  StarTek

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

StarTek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StarTek has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, StarTek is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Science Applications and StarTek

The main advantage of trading using opposite Science Applications and StarTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, StarTek can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in StarTek will offset losses from the drop in StarTek's long position.

The idea behind Science Applications International and StarTek pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.